Consolidations: Ch 2 - Wholly-owned subsidiary Flashcards
Wholly-owned subsidiary
What are consolidated financial statements ?
The result of combining of the financial statements of a parent and its subsidiaries.
What are the constraints i.t.o. differing reporting dates for a group?
The difference between the reporting dates may not exceed three months, if they differ.
What is required by the business combination valuation journals ?
Requires the parent to recognise the identifiable assets acquired and liabilities assumed of the subsidiary at fair value acquisition date.
What do the At acquisition journals do?
What should always be eliminated? Why?
Adding the financial statements of the parents and the subsidiary.
The investment of the parent in the subsidiary must be eliminated - an entity cannot invest in itself
What is done with intragroup transactions?
fully eliminate intragroup income and expenses.
What is a wholly owned subsidiary ?
Refers to a company whose entire share capital is held by a single controlling company. ( parent)
Journal entry
- at acquisition journal
Share capital ………… xxx
Retained earnings…..xxx
….investment: s ……………..xxx
What share capital is present in the group statements ?
Consolidated statement of financial position should ONLY include the share capital of the parent.
What is goodwill?
it is the term used when the interest acquired at is more than the net asset value
Where is goodwill presented in the consolidated financial statements ?
as a non current asset in the consolidated statement of financial position.
Journal entry - at acquisition consolidation journal.
- Goodwill ( payed > FV)
Share capital (S) …….. 22500
Retained earnings ……7500
Goodwill ……………………5000
…Investment : S ……………………35000
Gain from bargain purchase (GFBP) is?
The term used when the interest acquired at is less than the net asset value ?
Where should GFBP be recognised at acquisition?
In the profit or loss section of the consolidated statement of profit and loss in the line item “ other income”.
Where should GFBP be recognised after acquisition date ?
In the opening balance of retained earnings.
Journal entry - at acquisition consolidation journal.
- Gain from bargain purchase ( Payed < FV)
Share capital ……….. 22500
Retained earnings …7500
…. Gain from bargain purchase ….. 2000
…..Investment: S …………………………28000
